Income Taxes (Notes) |
3 Months Ended |
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Mar. 28, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The provision for income taxes consists of provisions for federal, state, and non-U.S. income taxes. We operate in an international environment; accordingly, the consolidated effective tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. Additionally, the calculation of the percentage point impact of goodwill impairment and other items on the effective tax rate is affected by income/(loss) before income taxes. Further, small movements in tax rates due to a change in tax law or a change in tax rates that cause us to revalue our deferred tax balances produce volatility in our effective tax rate. Our quarterly income tax provision is determined based on our estimated full year effective tax rate, adjusted for tax attributable to infrequent or unusual items, which are recognized on a discrete period basis in the income tax provision for the period in which they occur. Our effective tax rate for the three months ended March 28, 2026 was an expense of 20.9% on pre-tax income, which was favorably impacted by the tax benefit on the Italy Infant Transaction, the revaluation of deferred tax balances due to changes in U.S. state tax rates, the geographic mix of pre-tax income in various non-U.S. jurisdictions, and the reversal of uncertain tax position reserves in certain U.S. states and non-U.S. jurisdictions. Our effective tax rate for the three months ended March 29, 2025 was an expense of 29.9% on pre-tax income. Our effective tax rate was impacted by a less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions primarily due to the changes made to our corporate entity structure in December 2024, and certain unfavorable discrete deferred tax adjustments. The year-over-year change in the effective tax rate for the three-month period was primarily driven by certain favorable discrete income tax items, including the tax benefit on the Italy Infant Transaction, the revaluation of deferred tax balances due to changes in U.S. state tax rates, and the reversal of uncertain tax position reserves in certain U.S. states and non-U.S. jurisdictions. Other Income Tax Matters: We are currently under examination for income taxes by the Internal Revenue Service (“IRS”) for the years 2018 through 2022. In 2023, we received two Notices of Proposed Adjustment (the “NOPAs”) relating to transfer pricing with our foreign subsidiaries for the years 2018 and 2019. The NOPAs propose an increase to our U.S. taxable income that could result in additional U.S. federal income tax expense and liability of approximately $200 million for 2018 and approximately $210 million for 2019, excluding interest, and assert penalties of approximately $85 million for each of 2018 and 2019. In 2025, we received two NOPAs for the years 2020 through 2022 that could result in additional U.S. federal income tax expense and liability of approximately $200 million for 2020, $210 million for 2021, and $200 million for 2022, excluding interest, and assert penalties of approximately $85 million for each year. We strongly disagree with the IRS’s positions, believe that our tax positions are well documented and properly supported, and intend to vigorously contest the positions taken by the IRS and pursue all available administrative and judicial remedies. Therefore, we have not recorded any reserves related to this issue. We continue to maintain the same operating model and transfer pricing methodology with our foreign subsidiaries that was in place for the years 2018 through 2022. We believe our income tax reserves are appropriate for all open tax years and that final adjudication of this matter will not have a material impact on our results of operations and cash flows. However, the ultimate outcome of this matter is uncertain, and if we are required to pay the IRS additional U.S. taxes, interest, and/or potential penalties, our results of operations and cash flows could be materially affected.
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